Things can only get better

Credit crunch contrition from the commentariat

April 29, 2009

This morning an Editorial Intelligence (EI) briefing on ‘The Credit Crunch Commentariat‘ debated whether the media had talked us into recession or had downplayed the crisis and thus exacerbated its impact. “What, pray, is all the fuss about?” wrote Ex Economist editor, Bill Emmott, in the Guardian in August 2008. “Unemployment is down, the economy is growing. If we call this financial meltdown, we’ve been leading pretty gilded lives.” (The Economist also unequivocably supported Bush and the Iraq invasion). Times columnist and Illuminatus Emeritus, Anatole Kaletsky, ‘confidently predicted’ in January 2008: “The global credit crisis, far from taking a turn for the worse, is now almost over” …. “there will be no US recession” and “stock markets around the world will rise in 2008.”

Emmott, Kaletsky and many others suffered negligible reputational damage from these Panglossian prognostications. Kaletsky, an excellent academic economist and thoroughly nice guy, even predicted an upturn in commercial property values in 2009. He advises the boards of several global financial institutions (some are even still trading) and sits at the court of Soros (who DID predict the crisis of capitalism). Perhaps his globe-bestriding masters use him as some sort of contrarian idiot savant: “whatever Anatole says, do the opposite, but pretend we believe him.” Writing in the Houyhnhms Monthly, Prospect, an unrepentant Kaletsky argues that historical economic models were incapable of predicting today’s unprecedented circumstances and that economics itself is a ‘descriptive,’ not ‘predictive’ science (I prefer Carlyle’s term ‘dismal’). He correctly points the finger at economists for holding the bankers’ coats, and says they bear a large part of the blame (without acknowledging that he is one himself). Thus said similar in more robust fashion recently: time-to-junk-the-broken-economics – ’If bankers were whores, economists were their pimps’. Nobody has invited me to Davos so far.

Whether the commentariat were spectators, unwitting pawns or co-conspirators, some played key roles in the toxic conceit that financial services ‘products’ were the output, not the enablers, of the global economy. Bankers, the IMF and even the sainted Alan Greenspan, failed to foresee the deliquescence of the Anglo-Saxon financial model. The oft-repeated excuse, that nobody could have possibly foreseen the unprecedented crisis, is partly true. The commentariat works on what is heard around town. Global financial pr lizards, ratings agencies, consultants and the lobbyists that feed the media, on both sides of the Atlantic, have more of a case to answer as regards culpability. Some members of the commentariat should perhaps look to their sources and be more careful as to whom they accept a free lunch from in future – if there is one for the press media.

Many in the commentariat underwrote the suspension of disbelief which fuelled the lotto culture of the past decade. Crazy times did produce unlikely heroes, however – few more unlikely than Robert Peston. The excitable, eccentric BBC Business Editor became a leading British celebrity during the crisis, delivering barely-comprehensible analysis in a strangly-voice. Whether he indeed predicted the full extent of the crisis any better than others was anyone’s guess – nobody could understand a word. He was thus branded as the man with the labrador in the land of the blind, and will be remembered for telling us that Northern Rock Bank (of Toytown) was doomed, laddy, doomed. The accompanying run on shares and funds arguably forced Gordon Brown into its precipitous nationalisation and set the stage for the other lucky bankers. The Peston effect was so pervasive that Iain Dale, the UK political blogging celebrity has even questioned whether Peston himself is ‘spinning for Downing Street.’

The EI panel agreed that moral hazard was widely debated at the onset of the banking crisis, but largely evaporated as a topic as ‘doing whatever it takes’ became the populist battle cry. For this, the commentariat at large must take their share of the blame. Few in the media, but especially the UK government, acknowledged the scope of the recession until the arse was hanging out of our collective trousers. Plenty were prepared to pile in and kick the fat cat bankers, but few had the stomach to play it like it lays: the country’s fucked and we’ve hocked our kids’ futures in an insane last roll of the dice in a neo-Keynsian Ponzi scheme. Has that put the tin lid on my Davos invitation? Hope so.